SE31626 – The Schedule E expenses rule: changes from 2002/03

Sections 197AD to 197AH and Schedule 12AA ICTA 1988

Finance Act 2001 reforms the rules for tax relief for business journeys made by an employee using his or her own vehicle or bicycle. The new rules apply to 2002/03 onwards and provide for

• an exemption for mileage expense payments made to employees up to a statutory limit, (authorised mileage allowance payments or AMAPs)
• a fixed statutory mileage rate for deductions for employees for the cost of using their own vehicle or bicycle for business journeys to the extent that the fixed rate is not met by an AMAP, (mileage allowance relief or MARs)
• an exemption for payments made to employees for carrying passengers on business journeys.

There is detailed guidance on the new rules at SE31200 onwards.

As the new rules create a fixed statutory deduction for the cost of business journeys made by employees from 6 April 2002 using their own vehicle or bicycle it is necessary to disapply Section 198 ICTA 1988 so that there cannot also be a deduction for the actual costs the employee incurs. Section 198(5) prevents deductions from the same date for qualifying travelling expenses incurred in connection with the use of the employee’s own vehicle or bicycle.

The new rules do not affect the journeys that qualify for relief, they only affect the amount of relief that can be permitted.